At some point, dental professionals question why they do what they do and wonder if the grass is greener on the other side. Higher interest rates, shortage of staff, more competition and daily stress take their toll. Dentists sometimes need a compass. The guide below may help dentists when they get to the fork in the road or when they are disillusioned.
1. Bet on yourself, even if you are in debt up to your eyeballs. If you owe $400,000 in student loans and taking a CE course costing $10,000 will enable you to serve patients more competently and comprehensively, make this investment. If you have a practice generating cash, consider using this cash to buy your dental building, despite the large initial cost. It is forced saving (you will feel financial pain for the next three years after you buy it) and one that pays dividends and provides retirement income when you are older and possibly less healthy.
2. Make sacrifices during the early stages of your career, including buying your practice and then your dental building, even if it results in you foregoing your favourite car. Like garbage on the floor, would you be better off picking it up and disposing of it when you are healthy and are able to, or be forced to do it when you are frail?
3. Diversification works in a classroom. Many successful individuals have built wealth using hard work, time, patience, discipline, education, profession, owning their dental practice and real estate, not diversification.
4. Focus on cash more than profits or accumulating assets. If an investment generates big profits and no cash, maybe pass on it. Profits are not the same as cash. Repayment of your bank loan reduces cash but does not affect profits, except for the interest related to the loan repayment. Interest expense is an expense, a tax deduction, while the loan repayment is not an expense but surely reduces the cash in your pocket.
5. Don’t let the tax tail wag the investment dog. If an investment is bad and the tax aspects are good, pass on this investment.
6. Owning your practice is the best investment for a given level of risk. Why? You can control some of the variables, including how hard you wish to work and leverage your network/connections, which can generate money.
7. Tax savings are increased when family members are involved. The downside is that there is a breakdown in the relationship.
8. Optimize more than maximize or minimize. This applies to many aspects, including taxes, making money, having a happy home life, etc.
9. It’s hard to build wealth unless you have a stable home life and a divorce can ruin your financial GPS. Priority #1 is a happy home life.
10. Consider a prenuptial agreement or cohabitation agreement. It’s like insurance.
11. Your fishing rod is more important than your fish. Your fishing rod includes your dental practice, CE which you can use to repay loans faster and satisfy more patients competently. Your fish includes your home, boat, car, plane, etc. Your fishing rod generates cash, and your fish consumes cash.
12. Dentists suggest a crown after a patient has a root canal, but many don’t apply this to themselves. Many dentists own their practice and rent the premises where their practice is located. Owning your dental building protects your dental practice’s underlying investment. Many premise leases contain a demolition clause, which can ruin your dental practice’s value. With a demolition clause, the landlord can force you to vacate, usually upon a few month’s notice. This insecurity will reduce the pool of buyers as banks are reluctant to lend money in the presence of a demolition clause.
13. The lessons from kinetic and static energy apply to the business of dentistry. It takes much energy to get a car to cruising speed; much less energy is needed to maintain cruising speed once attained. It takes much sweat, tears, stress, and sometimes divorce to get a practice from nil patients to about 1400 active patients and much less energy to maintain a practice that one purchases with 1400 active patients. Ever wonder why dental investors with access to money don’t start a practice from scratch?
14. Strive for improvement, not perfection. When a dentist requests a bargain or best practice, it is likely that they end up never buying a practice. Instead, the dentist may be better off asking, “After overpaying for this practice, will I have more cash in my pocket than if I remain as an associate?”
15. Success is relative and best viewed with a panoramic lens over many years and encompasses much more than money, power, and prestige. Success is not the same as the trappings of success. Depending on one’s focus/priorities, they are in different quadrants and can lead to vastly different results.
16. When you are in the basement, failure and success have different meanings than when you are on top of the world. But it’s good to keep that image of being in the basement in your rear-view mirror. It is a constant during good and challenging times, serving as a ballast during a storm.
17. Humility is knowing one’s strengths and weaknesses. Contribute and appreciate the contributions of others to society. Humility is a key ingredient of success.
18. A healthy enduring relationship is not built on a 50/50 principle. Sometimes we take more than we give and vice versa. Sometimes, the synergy from a relationship exceeds the individual’s effort and contribution, and that’s okay.
19. Viewing and understanding the panoramic image of your financial and personal landscape will help you focus on your personal and professional goals and prioritize your time and effort. Don’t just focus on the PAs and bitewings. Some dentists may view their 60-year-old competitor 500 metres away as a threat. I view this dentist as an ally. Why? It may be a great practice to purchase one day.
20. Over-analysis leads to inertia. I don’t need to know the height of the CN Tower to know that I won’t climb it from the base to the top after having a big meal.
21. Block out the noise and distractions which prevent us from focusing on our goals. Don’t focus on the sports car your colleague drives or the mansion they live in. You don’t know how much they owe. Focus on how you can improve yourself and try to be the best version of yourself. If you have done this, that is a success.
22. Many dentists have made bad decisions by focusing on cost and what they pay and ignoring value and what they receive. A dentist was proud of the fact that he purchased an autoclave for $400 less than the other supplier was charging. When the autoclave broke down, and no replacement was secured within 2 days, their production dropped by $12k.
23. Relationships in many walks of life are priceless. Be it family or business. My mechanic for 25 years compensates for me not being handy/mechanically inclined. The trust nurtured over decades means I have peace of mind and gratefully pay the invoices he submits without question or hesitation.
The above lessons were gleaned from having served dentists for 40+ years. They are excellent teachers.
About the Authors:
David Chong Yen*, CPA, CA, CFP, Louise Wong*, CPA, CA, TEP, Basil Nicastri*, CPA, CA and Eugene Chu, CPA, CA of DCY Professional Corporation Chartered Professional Accountants are tax specialists* and have been advising dentists for decades. Additional information can be obtained by phone (416) 510-8888, or e-mail david@dcy.ca / louise@dcy.ca / basil@dcy.ca / eugene@dcy.ca. Visit our website at www.dcy.ca. This article is intended to present ideas and is not intended to replace professional advice.
